Mylan Under Scrutiny After 'Valeant-Like' Epipen Price Raise
Shares of Mylan (MYL) are sliding as the company makes headlines over price hikes of its EpiPen device, which is used by individuals to treat emergency allergic reactions. Wells Fargo analyst David Maris, who had previously voiced concern over price increases from several companies including Valeant Pharmaceuticals (VRX), noted that he believes the media attention will not benefit Mylan in the long run.
EPIPEN PRICE HIKE: Yesterday, MarketWatch reported that the price of Mylan's EpiPen has risen sixfold over the last several years. What the price increase means for patients varies according to their health insurance coverage, but is exacerbated by the difficulty of procuring the generic, which holds a small portion of the market, the publication noted. Further, MarketWatch said Mylan's price increase was "Valeant-like" (VRX) and compared it to Martin Shkreli's Turing Pharmaceuticals raises in approach. On Wednesday, CNBC had also reported on the subject, noting that the pharmaceutical company had jacked up the prices for an EpiPen from around $100 in 2008 to $500 and up today, a hike of over 400%. Former presidential candidate Bernie Sanders retweeted yesterday NBC's article and added: "The drug industry's greed knows no bounds." Further, Sanders tweeted to his 2.4 million followers of his official Twitter account as Senator from Vermont that he sees "no reason an EpiPen, which costs Mylan just a few dollars to make, should cost families more than $600."
PRICING COMES UNDER SCRUTINY: In a research note this morning, Wells Fargo analyst David Maris, who has been among the most vocal critics of Valeant and its price hikes, told investors that he is more concerned about the potential impact of the increased media attention on EpiPen sales later rather than now. While Maris believes price raises may benefit near-term earnings, he does not think the pharmaceutical company benefits from this type of focus in the long run, especially considering the election outcome and Senator Sanders' potential role on the Senator Committee on Health, Education, Labor and Pensions. Maris had previously highlighted price increases from several manufacturers, including Mylan, in a June research note, saying that the price hikes could "increase scrutiny and reputational risk." The analyst has a Market Perform rating on Mylan's shares.
MYLAN RESPONDS: Contacted by The Fly to comment on Maris' June 10 note regarding Mylan'[s price increases, the pharmaceutical company responded at the time by saying: "A flawed analysis focusing on a small number of products out of the more than 1,400 products Mylan sells globally and the approx. 600 products we sell in North America is simply self-serving and misleading to investors. [...] Mylan's business model is not today, nor has it ever been, premised on price hikes."
PRICE ACTION: In morning trading, shares of Mylan dropped over 2% to $48.17. [Update: MYL closed -1.34%]
Disclosure: None.